Travelzoo Posts 13% Revenue Gain in Q2

Travelzoo (TZOO -1.98%), the internet media company specializing in travel deals and experiences, reported its second quarter 2025 financial results on July 23, 2025. The headline news was a 13% year-over-year increase in GAAP revenue to $23.9 million, outpacing analyst estimates of $23.3888 million (GAAP). However, GAAP earnings per share (EPS) declined sharply to $0.12, missing consensus expectations of $0.236 and falling from $0.23 a year ago. Travelzoo’s results reflected robust top-line growth, but Near-term profits suffered due to aggressive spending on marketing for its paid membership program. The company described the quarter as one of revenue strength, but with profitability pressured by ongoing strategic transition.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About Travelzoo and Recent Business Priorities

Travelzoo operates digital platforms and mobile applications that curate travel, entertainment, and lifestyle offers for consumers. The company primarily generates revenue by selling digital advertising and earning commissions from partners when members purchase vouchers, trips, or experiences.

It is currently focused on transitioning from a free membership base to a model where most users pay an annual fee to access exclusive Club Offers. Key to the business are its strong digital reach, the ability to attract advertisers, partnerships with thousands of travel providers, and the strategic push toward recurring revenues through paid subscriptions. The company’s recent attention is on building paid membership, expanding in North America and Europe, advancing its Jack's Flight Club operation, and developing new experiences—including innovation in the metaverse travel sector.

Highlights from the Quarter: Growth, Investment, and Segment Shifts

During Q2 2025, Travelzoo’s GAAP revenue came in ahead of expectations and rose 13% year-over-year. This growth was driven mostly by membership gains in North America and within Jack’s Flight Club, which operates as a subscription service offering discounted flight alerts to members. The North America segment saw revenue increase 14% year-over-year to $16.1 million, with an operating profit of $2.8 million. Although this segment still contributed positively, its operating margin for Travelzoo North America declined to 17% from 26% a year ago, reflecting higher marketing investments.

In Europe, revenue advanced 7% to $6.4 million, but the segment swung to a loss of $0.88 million from a $0.51 million profit a year earlier. The loss was mainly attributed to increased spending on acquiring new Club Members. Jack’s Flight Club grew revenue by 33% year-over-year to $1.4 million and saw premium subscriber numbers rise 15% year-over-year. This segment posted an operating profit of $156,000, compared with a small loss last year.

Operating profit (GAAP) for the whole company dropped substantially year-over-year, coming in at $2.1 million under generally accepted accounting principles (GAAP) and $2.4 million on a Non-GAAP basis. Management stated that the immediate expense recognition for marketing spend—coupled with recognition of membership revenue over a full year—created a “sizable reduction” in earnings. This effect is common with subscription-based business models as new member acquisition costs are expensed upfront, while related revenue is recognized gradually.

The company’s nascent metaverse initiative, branded Travelzoo META, contributed only marginal revenue. Licensing income from new geographic launches, such as Australia and Japan, also remained small but is expected to grow over time. Travelzoo further leveraged its long-standing relationships with more than 5,000 travel and leisure providers to source exclusive offers and airport lounge perks for its members.

Margins, Balance Sheet Dynamics, and Cash Flow Trends

The company’s gross margin was approximately 78%, even as revenue stepped up. However, non-GAAP operating margin fell from 19% in Q1 2025 to 10.0%. Cash and cash equivalents at quarter end totaled $10.4 million. Cash flow from operations (GAAP) also fell to $1.3 million versus $3.3 million in Q1 2025.

Travelzoo used $2.5 million to repurchase 172,088 of its own shares as management sought to take advantage of perceived value in the company’s stock. The higher pace of share buybacks, combined with marketing costs and reduced profits, contributed to negative equity at the end of the quarter—a shift from a positive balance at the end of 2024. Deferred revenue increased compared to the prior year.

Looking Ahead: Management’s Outlook and Key Factors for Watch

Travelzoo management projects that revenue growth will accelerate in Q3 2025 and beyond as more membership fees are recognized over time and additional free Legacy Members convert to paid status. Leadership expects that as the base of recurring fee revenue builds, profitability should “substantially increase,” though short-term EPS and profit may continue to see fluctuations—especially as marketing expenses are booked immediately and recognized revenue lags behind, as stated in management commentary.

No specific full-year or quarterly profit or revenue target was provided in the earnings release. Investors will likely focus on the conversion rate of free to paid members, retention trends, further development of Travelzoo META experiences, and any noticeable improvement in segment profitability. Ongoing cash allocation to share repurchase and negative equity trends on the balance sheet will also be important to watch over the coming quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.